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31 thoughts on “The Tourist “Trump Slump””

Our resident Trump supporters should note that tourism to the US is counted as an export. There are also a lot fewer foreign students attending US colleges and universities. And foreign students studying here count as exports as well.

If this is intended to be a statement on how American culture is in a downward spiral it seems very relevant and interesting. If it’s commentary on Economics it doesn’t hardly seem worth mentioning. I have no feeling to Delta Air, a deep-rooted hatred to American Airlines for stranding me once with no refund, and having a hard time figuring who else this really hurts that much.

The US travel and tourism industry contributed nearly USD1.6 trillion to US economy in 2015 or 2.6 percent of its GDP. Travel and tourism exports accounted for 11 percent of all US exports and 33 percent of all US services exports, positioning travel and tourism as the nation’s largest services export.

@ 2slugbaits
So we take that 2.6%, multiply it by the percent decline in tourism revenues from April 2017 to the most recent available number and then we get what percent?? Obviously using log or whatever you need to smooth out the numbers. (You can even use 2020 tourism revenue estimates if you like). WOW, sounds “crushing”. I’d say that has me about as worried as exports of milk being shut off to Canada.

trump has a lot of little battles you can describe that way moses. individually, they do not mean a whole lot. but add them all together collectively, and they can result in a slowdown or even contraction over time. you have to remember, trump does not look at things in the big coherent picture. he looks at simply one battle at a time-independent of one another. broad policy means nothing to him-but it does have an impact on the overall economy.

@ baffling
That’s a fair enough argument. And from a cultural standpoint the tourism numbers bear pointing out. My point is, economically it’s a mosquito (at this point certainly). I’m just saying, you pick your battles on a blog or in the public dialogue, and if you’re trying to fight against poorly done and inefficient authoritarian leadership, you don’t discuss how the length of Lederhosen has changed between 1941 to 1943. Or maybe to use a better analogy, you wouldn’t necessarily discuss how loss of Polish and French tourism to the Rhine Valley is effecting the region economically.

I live in a college neighborhood (Portland State University) and I have noticed a large decrease in the number of Middle Eastern and Asian students, on the order of 50% over the last 4 years. I assumed it was that their local economies were struggling, but I don’t know. It could be anti-Trump, but like I said it started 4 years ago, preceding Trump. As to the overall tourist trade ( I own a business downtown) I have not seen a decrease in foreign tourists. If anything they may be more curious. I think the driving factor is affluence in their native country. If they have more funds, they are more likely to travel abroad to the locales that are more interesting to them

sammy, not to belittle portland state, but it is not one of the trending universities for asian students. if you look at some of the higher caliber schools, they have kept up their asian student enrollments, especially until this year, which has begun to crack. even top schools are having more difficulty attracting students from china today. multiple factors are at play, but the trump attitude and policies toward china are certainly negative. if it continues over a couple of years, it will pose a problem for higher education overall, as many chinese students pay full tuition rates. over the last decade, undergraduate programs have seen a significant rise in chinese students. that seems to be changing under current conditions.

that plan is too well thought out, benlu. if trump is intentional in reducing the number of chinese students, it is because they are a group of people he can bully and get away with while boasting his strength to his base. it is not part of some bigger, broader well conceived plan. you think the chinese students here will protest and riot? no. they will quietly return home in frustration. trump knows this.

I suspect that China is mainly interested in inflicting pain on US educational institutions. One of my brothers was telling me that at his university they saw a drop of 400 engineering students this fall, with the drop coming almost entirely from Chinese students. That put a real squeeze on the department’s budget because it was unexpected back when budgets and tuition rates were set last spring. It’s also worth keeping in mind that the gap between US and Chinese universities isn’t anywhere near as large today as it used to be.

the china scholarship fund served as a large source of graduate student funding over the past decade, and this was revenue directly into the coffers of our stem programs at american universities. that has become a pretty big shortfall this year, and if it continues into next year, many stem programs at american universities will need to take action. i would say this is neither good for chinese students interested in studying in america, or american programs looking for students. and 2slugs is correct, the gap between the us and chinese universities is not as great as it once was-but it is still substantial on the innovation front.

The percentage of Asian in Ivy-League schools seems to waver between 20%–30%. I was actually surprised by this because I assumed as Portland is a city near the west coast there would be a higher proportion of Asian students.

I’m not sure how reliable “dawn dot com” is as a source of information, but the numbers here DO seem very believable to me: “Other universities, such as the California Institute of Technology, which does not use race-based criteria for admissions, saw the percentage of Asian-Americans rise from 19pc in 1998 to 43pc in 2013. Harvard and the secretive admissions process, the lawsuit alleges, is designed to artificially engineer the percentage of Asian-Americans at between 12pc to 18pc, even if a greater percentage is qualified.” https://www.dawn.com/news/1417868

moses, per this discussion, you probably need to separate the asian population that are residents of the us, versus those students attending school here from a foreign country. my guess is the ucsd number is includes many american students of asian decent-but that is not what we are really discussing here. and comparing caltech to harvard is a bit misleading. caltech is a fully stem school, while harvard has a much broader liberal arts mission.

Surprised that’s not available publicly. FRED, FedRes, Treas dept etc. What would the title of the data series be that you are looking for and the specific time intervals of the data that you would need??

Professor Chinn,
Quickly looking at the data website, the cost of the data did not jump-out at me. What is the cost? Maybe we could have an Econbrowser “Go Fund Me” contribution to buy the data. It would be very interesting to see an EViews model that you contemplate.

According to the graph, tourism peaked in 2014, well before President Trump. In fact, the graph shows, the seasonal low for tourism rebounded from the beginning of 2017. Then peak is higher in 2017 then in 2016, which could be interpreted as the beginning of the trend in tourism. Time will tell.

What is missing from the post is Menzie’s graph of the strength of the dollar he uses to identify other trends. It would be useful here.

Ed Hanson: You can do it on TradingEconomics website. Of course, you need to include other covariates to get an unbiased regression estimates, including rest-of-world GDP (which has been trending upwards quite rapidly, if you weren’t aware).

Menzie Caution: I’m making a completely uninformed comment without any tests of the data, but just based on an ocular analysis of the tourism time series and the intuition that there is very likely a feedback effect, you’d probably want to consider some kind of system of vectors…probably a VARMA approach. If you assume that real exchange rates affect tourist arrivals, then tourist arrivals would likely affect real exchange rates with a lag because tourists need to demand US dollars during their visits. So that would justify an approach using a system of vectors; i.e., a VAR model with an ordered Choleski decomposition (i.e., tourists arrive here before they spend money here). The ocular analysis of the tourist time series looks very much like the old Box & Jenkins Airline model, which followed a (0 1 1, 0 1 1) ARIMA specification; i.e., one order of non-seasonal and seasonal differencing and one order of non-seasonal and seasonal Moving Average (MA) terms. So that likely gets you to a VARMA model system. If the RHS of the real exchange rate equation contained other variables not included in the tourist arrival equation (e.g., rest-of-world GDP), then you have to solve using SUR rather than OLS. Sounds like too much work for my retired tastes.

2slugbaits: I agree in principle, but tourism expenditures (including exports of travel services) is something like $250 billion, while exports is something like $2.6 trillion — so I’d guess 10% exports. So the question is whether the feedback effect is sufficiently large. One reason I’d say no is that for the US, we tend to think of the exchange rate as being driven by the financial account rather than the current account at the short to medium run – so driven by interest rates and Keynesian effects. But, it can all be (kind of) tested for in a cointegration framework, at least for weak exogeneity.

We need to look at not just the strength of the dollar but at average airfares which are closely related to oil prices. Also, for the last few years Asian governments have been cracking down on junkets as a means of currency control.